Directors Report and Financial Statements for the year ended 30 June 2016

Transcription

1 Directors Report and Financial Statements for the year ended 30 June Sydney Motorway Corporation Pty Limited ABN and its Controlled Entities

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3 Directors Report and Financial Statements 3 Contents Directors Report 4 Auditor s Independence Declaration 11 Statement of Comprehensive Income 12 Statement of Financial Position 13 Statement of Changes in Equity 14 Statement of Cash Flows 15 Notes to the Financial Statements 16 Directors Declaration 42 Independent Auditor s Report 43

4 Directors Report and Financial Statements 4 Directors Report The Directors of Sydney Motorway Corporation Pty Limited present their report of the consolidated entity (referred to hereafter as the Group, SMC, or the company ), consisting of Sydney Motorway Corporation Pty Limited ABN and its controlled entities for the financial year ended 30 June and the auditor s independence declaration thereon. Organisation overview Sydney Motorway Corporation (SMC) is a private company limited by shares and established by the NSW Government in August 2014 under the Corporations Act 2001 (Cth). SMC is governed by a majority independent Board appointed by its joint shareholders, the NSW Treasurer and NSW Minister for Roads, Maritime and Freight. Principal activities SMC, through its subsidiaries, finances and delivers major infrastructure solutions to support Sydney s long-term economic and population growth. During FY, SMC was responsible for financing and delivering key components of WestConnex Australia s largest transport infrastructure project, including: M4 Widening and M4 East New M5 (including King Georges Road Interchange Upgrade) M4-M5 Link. WestConnex is a central part of an integrated transport solution for Sydney. It was a key recommendation of the State Infrastructure Strategy 2012 (and updated in 2014) and the Long Term Transport Master Plan. WestConnex will provide improved connectivity between Greater Sydney and Global Sydney s primary economic centres and international gateways. Key functional changes this year Following its inception in 2014, SMC was commissioned by the NSW Government to secure financing solutions for the delivery of WestConnex. Until 30 September, WestConnex Delivery Authority, a subsidiary of Roads and Maritime, was responsible for the procurement and project delivery of WestConnex. On 1 October, WestConnex Delivery Authority s procurement and project delivery functions transferred to SMC. WDA s Government client functions such as property acquisition and obtaining planning approvals were transferred to Roads and Maritime Services.

5 Directors Report and Financial Statements 5 Board of Directors and Officers Directors Name Position Appointed/Resigned Anthony Shepherd AO Chair, Non-executive Director May resigned September Peter Brecht Chair, Non-executive Director May (as Chair from October ) Penelope Graham Chair, Non-executive Director September 2014 (as Deputy Chair since May ) Mary Ploughman Non-executive Director September 2014 Cameron Robertson Non-executive Director September 2014 Rodney Pearse Non-executive Director September 2014 Leilani Frew Non-executive Director August 2014 resigned in August John Cooper Non-executive Director June Dennis Cliche Executive Director June Peter Regan Executive Director August 2014 resigned November John Kite Company Secretary and Chief Financial Officer September 2014 resigned as Company Secretary in February Roderick MacKinnon Company Secretary February Officers of the company Name Position Appointed/Resigned Dennis Cliche Chief Executive Officer June John Kite Company Secretary January - resigned February Roderick MacKinnon Company Secretary February Shareholders SMC has two shareholders: The Hon Gladys Berejiklian MP, NSW Treasurer The Hon Duncan Gay MLC, Minister for Roads, Maritime and Freight Audit and Risk Committee SMC has an independent Audit and Risk Committee comprising: Name Rodney Pearse Peter Brecht* John Cooper Cameron Robertson Mary Ploughman Dennis Cliche Roderick MacKinnon Position Chair, Non-executive Director Non-executive Director Non-executive Director Non-executive Director Non-executive Director Chief Executive Officer and Executive Director Company Secretary *Peter Brecht resigned from the Audit Risk Committee on 16 June and was replaced by John Cooper the same day.

6 Directors Report and Financial Statements 6 Directors Report continued Remuneration Committee SMC has a Remuneration Committee comprising: Name Penelope Graham Rodney Pearse Dennis Cliche Steve Doran Position Chair, Non-executive Director Non-executive Director Chief Executive Officer and Executive Director Director HR & Services The year in review highlights July August September October November November November November November January February February March March March March April April Work on WestConnex King Georges Road Interchange Upgrade commenced, marking the start of New M5 project 18 months early Work commenced at St Lukes Park, Concord to build a new hockey facility for the community in preparation for construction of the WestConnex M4 East WestConnex M4 East Environmental Impact Statement released for public submissions WestConnex Delivery Authority s procurement and delivery functions transferred to SMC The first of 240 girders moulded for construction of the WestConnex M4 Widening viaduct WestConnex Updated Strategic Business Case published WestConnex New M5 preferred design released and design and construction contract awarded Financial close for WestConnex New M5 $1.5 billion in private sector debt and a $2 billion Australian Government concessional loan, the first of its kind WestConnex New M5 Environmental Impact Statement released for public submissions WestConnex M4-M5 Link State Significant Infrastructure Application Report lodged with NSW Department of Planning and Environment marking commencement of the planning assessment process WestConnex M4 East State planning approval granted New, international-standard hockey facilities for the community at St Lukes Park Concord completed Department of Planning and Environment issued Secretary s Environmental Assessment Requirements for WestConnex M4-M5 Link WestConnex M4 East construction commenced Alexandria Landfill major clean-up completed on this site, for use as the St Peters Interchange, part of WestConnex New M5 Testing commenced on the WestConnex M4 Widening tolling systems WestConnex New M5 State planning approval granted WestConnex King Georges Road Interchange Upgrade construction reaches half way point Significant changes since 30 June July : WestConnex New M5 approved under the Commonwealth Environmental Protection and Biodiversity Conservation Act 1999, the final planning approval required prior to construction. July : WestConnex New M5 construction commenced. July : WestConnex M4 East tunnelling commenced. WCX M4 Pty Ltd entity is in the process of being restructured from a single entity into a dual flow-through trust structure similar to the WCX M5 group. This is expected to be implemented in the last quarter of this year. SMC has commenced work to obtain a limited recourse debt facility for the M4 concession. It is seeking to raise up to $1.8 billion with financial close targeted for late.

7 Directors Report and Financial Statements 7 Events occurring after balance sheet date Post reporting date, a claim has been received with respect to WCX M4 Pty Limited. The validity of this claim is currently being assessed. Roads and Maritime Services (RMS) has been advised of this claim in accordance with requirements of the Project Deed. Finalisation of this matter is subject to further discussions and negotiation. On 22 July, WCX M5 Finco Pty Ltd effected the drawdown of funds under the Senior Syndicated Facility Agreement and Subordinated Commonwealth Loan Agreement. Outlook In the coming year, Sydney Motorway Corporation expects to: Complete construction and commence operation of the widened M4 Motorway between Parramatta and Homebush Increase tunnelling activity on the M4 East motorway project as 18 roadheaders are progressively brought into service Achieve approval of M4 East key reports and plans required under the project s Conditions of Approval Secure private sector debt finance for Westconnex M4 Release a reference design for WestConnex M4-M5 Link Start tunnelling on WestConnex New M5 Complete construction on WestConnex King Georges Road Interchange Upgrade Exhibit the WestConnex M4-M5 Link s Environmental Impact Statement for public comment Start major procurement for WestConnex M4-M5 Link Launch SMC s community, education and training employment programs. SMC projects WestConnex is part of an integrated transport plan to keep Sydney moving easing congestion, creating jobs and connecting communities. The new motorway will provide vital support for Sydney s long-term economic and population growth. WestConnex is being delivered in stages and is expected to be completed in It will: Widen the M4 Motorway and extend it in underground tunnels between Homebush and Haberfield Double road capacity along the M5 corridor with the New M5 underground tunnels running between St Peters and Kingsgrove Provide an underground link between the M4 and M5 motorways creating a seamless motorway without traffic lights Provide a western bypass of Sydney city s central business district Provide connections to the Western Harbour Tunnel and BeachesLink and a future southern Sydney F6 extension Enable a connection to Sydney Airport and Port Botany via Sydney Gateway (currently being designed by Roads and Maritime Services) Provide improved connectivity between key employment, residential and industrial hubs throughout Greater Western Sydney Enable improved public transport along key corridors including Parramatta Road (between Burwood Road and Haberfield) and along Victoria Road Rozelle Provide more than 18 hectares of new open space and 14 kilometres of new and improved cycleways and walkways providing improved connectivity for non-motorway users as well. WestConnex M4 Widening WestConnex M4 Widening involves widening the M4 Motorway between Parramatta and Homebush creating an additional lane in each direction. Construction on the project commenced in March with a total project value of approximately $0.5 billion. The project is about 7.5 kilometres in length and the motorway is expected to open to traffic in WestConnex M4 East WestConnex M4 East involves extending the M4 Motorway from Homebush to Haberfield (via Concord) in underground tunnels, including providing future connections to the M4 M5 Link.

8 Directors Report and Financial Statements 8 Directors Report continued Construction on the project commenced in March. The project is about 6.5 kilometres in length (with 5.5 kilometres of the motorway in tunnel) and the motorway is expected to open to traffic in WestConnex New M5 WestConnex New M5 involves duplicating the M5 East motorway corridor, with new underground motorway tunnels between Beverly Hills and a new interchange at St Peters. This Interchange allows for connections to Sydney Gateway and the M4-M5 Link. Construction on the project commenced in July with completion targeted for The New M5 tunnels provide connections for the proposed M4 M5 Link and the Southern Connector (a new potential motorway connecting to Sydney s southern suburbs). WestConnex M4-M5 Link WestConnex M4-M5 Link will connect the M4 East in Haberfield to the New M5 in St Peters (via Rozelle and Camperdown) in underground motorway tunnels. It includes a future connection for the Western Harbour Tunnel and BeachesLink. This project is in the early planning stages. Financing and investment SMC s commercial objective is to safely develop, deliver and operate all stages of the WestConnex Project through the provision of best-value solutions for our shareholders. SMC s financing strategy for the WestConnex motorway is based on a limited recourse project financing and sale-of-business model. This strategy involves establishing SMC subsidiaries to enable the raising of limited-recourse debt against net toll revenues to fund the construction costs of each WestConnex project. M4 Widening and M4 East SMC has commenced work for a limited recourse debt-raising process for the M4 East and M4 Widening, seeking to raise up to $1.8 billion with financial close targeted for November. New M5 In November, SMC successfully raised: $1.5 billion limited recourse in senior debt from domestic and international financiers $2.0 billion limited recourse subordinated loan from the Australian Government. M4-M5 Link SMC is continuing to work with the NSW Government on financing and procurement strategy for the M4-M5 Link. Planning approvals for WestConnex Each WestConnex project is subject to a thorough environmental impact assessment under the Environmental Planning and Assessment Act This process involves the preparation and public exhibition of an Environmental Impact Statement (EIS). Each EIS includes information on the project design, air quality, heritage, traffic and transport impacts, and the management of other construction and operational impacts. Stakeholders and members of the community are able to provide feedback during the preparation and exhibition of the EIS. Submissions received during the EIS exhibition are addressed in a Submissions and Preferred Infrastructure Report and submitted to the Minister for Planning for consideration in the planning approval assessment process.

9 Directors Report and Financial Statements 9 WestConnex projects that have received planning approval are: M4 Widening M4 East King Georges Road Interchange Upgrade New M5. The EIS for WestConnex M4 M5 Link is expected to the exhibited in Environmental regulations SMC and its contractors are delivering WestConnex in accordance with: The measures identified in the related Environmental Impact Statement and Submissions and Preferred Infrastructure Report The Conditions of Approval set out by the Department of Planning and Environment and Minister for Planning The related project Environmental Protection Licences. Our key stakeholders and regulators include: The NSW Environment Protection Authority (EPA), which monitors compliance with the Environmental Protection Licences and regulates environmental performance Department of Planning and Environment, which monitors compliance with the conditions of project approval and mitigation measures agreed to during planning approval Commonwealth Department of the Environment, which regulates national environmental laws, some of which focus on the conservation of biodiversity. SMC has invested into project-specific environmental expertise and management systems that advise, guide, monitor and report on the fulfilment of environmental obligations by our contractors and delivery teams. The EPA is the primary governing body for all the requirements associated with NSW environmental regulations. The WestConnex projects are subject to environmental regulations under Australian Commonwealth and State laws. WCX M4 and WCX M5 is committed to managing construction and operations of the WestConnex Motorways in an environmentally responsible manner. Operating and financial review Financial Highlights 30 June $m 30 June $m Summary of financial performance Revenue 1, Expenses 1, Profit for the year Summary of financial position Total assets 2, ,063.7 Total liabilities Total equity 2, Financial statistics Current ratio Total equity to total assets 84.4% 89.3% Other balance sheet items Cash and cash equivalents Current trade and other receivables

10 Directors Report and Financial Statements 10 Directors Report continued How we have performed this year Work commenced on the construction of Stage 1B (M4 East) and Stage 2 (New M5) projects There was also increased activity on Stage 1A (M4 widening) which commenced in March and is expected to be completed in 2017 This resulted in increased construction revenue and construction expense for The Group incurred $1.5 billion in construction costs, with an equivalent amount recognised as construction revenue, in accordance with AASB Interpretation 12 Service Concession Agreements This also gave rise to an intangible asset, with a total carrying value of $1.8 billion as at 30 June The $12.5 million profit for the year is underpinned by interest income. How we funded the business and managed risks $3.5 billion of Senior and Subordinated Debt was successfully raised to finance the New M5 project. The final environmental approval was received in July $2.4 billion was progressively contributed by shareholders to 30 June under equity subscription agreements A total of $1.8 billion has been invested from December 2014 to June across all the projects No debt was utilised as at 30 June. The first drawdown under the New M5 facilities was in July $1.5 billion of forward interest rates swaps are in place to reduced future volatility in interest rate movements. Dividends Subject to the Corporations Act, the Board needs to determine the dividend policy of the Company from time to time and in doing so will consider the implications for cash reserves and solvency of the Company. No dividends were paid or proposed to be paid to members during the financial year ended 30 June. The Company has no plans to pay a dividend until the current construction projects are completed. Indemnification of officers and auditors As provided under the Constitution, the Company indemnifies current and former directors and officers for any loss arising from any claim by reason of any wrongful act committed by them in their capacity as a director or officer (subject to certain exclusions as required by law). During the financial year, the Company has paid premiums in respect of contracts insuring the directors and officers against any liability of this nature. In accordance with normal commercial practices, under the terms of the insurance contracts, the nature of the liabilities insured against and the amount of premiums paid are confidential. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or any related body corporate against a liability incurred as such by an officer or auditor. Auditor s independence declaration The auditor s independence declaration for the year ended 30 June is attached to this Directors Report. Rounding of amounts The Group is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report and Director s report have been rounded off to the nearest thousand dollars, unless otherwise stated. This report is made in accordance with a Resolution of the Board of Directors and is signed for and on behalf of Directors pursuant to s.298 (2) of the Corporations Act Peter Brecht Chairman Dennis Cliche Director Sydney, 22 September

11 Auditor s Independence Declaration Directors Report and Financial Statements 11

12 Directors Report and Financial Statements 12 Statement of Comprehensive Income For the year ended 30 June Note Revenue Construction revenue 2 1,518, ,688 Management services revenue 30,755 Interest income 25,508 11,560 20,102 11,540 Other gain 10,000 Other revenue 15,609 12,806 Total revenue 1,560, ,248 73,663 11,540 Expenses Construction costs 3 1,485, ,688 Interest expense on derivatives 31 Employee related costs 4 27, , Other operating expenses 5 34, , Finance costs 6 18 Depreciation and amortisation 9 & Total expenses 1,547, ,045 54,222 1,357 Profit for the year 12,517 10,203 19,441 10,183 Other comprehensive income Items that may be reclassified subsequently to the profit or loss: Loss on cash flow hedges (121,016) Total other comprehensive loss for the year (121,016) Total comprehensive income/(loss) for the year (108,499) 10,203 19,441 10,183 The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

13 Statement of Financial Position As at 30 June Directors Report and Financial Statements 13 Note Current assets Cash and cash equivalents 7 862, , , ,612 Trade and other receivables 8 72,455 17,165 17,547 8,983 Other assets 12 7,565 Total current assets 942, , , ,595 Non-current assets Property, plant and equipment 9 3, , Intangible assets 10 1,745, , ,326 Investment in subsidiaries 11 1,898,298 69,078 Other assets 12 18,685 Total non-current assets 1,767, ,133 1,901, ,523 Total assets 2,709,548 1,063,662 2,439, ,118 Current liabilities Trade and other payables , ,336 20,255 11,812 Provisions 14 3, , Total current liabilities 299, ,453 22,456 11,929 Non-current liabilities Derivative financial liabilities ,016 Provisions 14 1, Total non-current liabilities 122, Total liabilities 421, ,459 23,409 11,935 Net assets 2,287, ,203 2,415, ,183 EQUITY Issued capital 16 2,386, ,000 2,386, ,000 Reserves 17 (121,016) Retained earnings 22,720 10,203 29,624 10,183 Total equity 2,287, ,203 2,415, ,183 The above Statement of Financial Position should be read in conjunction with the accompanying notes.

14 Directors Report and Financial Statements 14 Statement of Changes in Equity For the year ended 30 June Contributed equity Cash flow hedge reserve Retained earnings Total equity Balance at 28 August 2014 Profit for the period 10,203 10,203 Other comprehensive income Total comprehensive income 10,203 10,203 Issue of share capital 940, ,000 Balance at 30 June 940,000 10, ,203 Profit for the year 12,517 12,517 Other comprehensive loss (121,016) (121,016) Total comprehensive (loss)/income (121,016) 12,517 (108,499) Issue of share capital 1,446,157 1,446,157 Balance at 30 June 2,386,157 (121,016) 22,720 2,287,861 Contributed equity Cash flow hedge reserve Retained earnings Total equity Balance at 28 August 2014 Profit for the period 10,183 10,183 Other comprehensive income Total comprehensive income 10,183 10,183 Issue of share capital 940, ,000 Balance at 30 June 940,000 10, ,183 Profit for the year 19,441 19,441 Other comprehensive income Total comprehensive income 19,441 19,441 Issue of share capital 1,446,157 1,446,157 Balance at 30 June 2,386,157 29,624 2,415,781 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

15 Statement of Cash Flows For the year ended 30 June Directors Report and Financial Statements 15 Note Cash flows from operating activities Interest received 24,958 11,075 19,597 11,057 Other receipts 138,502 5,163 43, Payments to employees and suppliers (167,024) (8,186) (50,625) (8,186) Net cash (used in)/from operating activities 23 (3,564) 8,052 12,497 3,005 Cash flows from investing activities Payments for concession assets (1,380,262) (118,558) (22,873) (45,185) Payments for property, plant and equipment (3,376) (130) (3,163) (130) Payments for investments (1,829,220) (69,078) Proceeds on transfer of intangibles 88,341 Net cash used in investing activities (1,383,638) (118,688) (1,766,915) (114,393) Cash flows from financing activities Proceeds from issue of share/unit capital 1,446, ,000 1,446, ,000 Payments of financing costs (26,250) Net cash from financing activities 1,419, ,000 1,446, ,000 Net increase/(decrease) in cash and cash equivalents 32, ,364 (308,261) 828,612 Opening cash and cash equivalents 829, ,612 Closing cash and cash equivalents 7 862, , , ,612 The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

16 Directors Report and Financial Statements 16 Notes to the Financial Statements For the year ended 30 June 1. Summary of Significant Accounting Policies Sydney Motorway Corporation Pty Limited (the Company or SMC ) is a private company limited by shares and established by the New South Wales State on 28 August 2014 under the Corporations Act The role of the Company is to invest (directly and/or indirectly) in, and provide or arrange finance for, Designated Road Projects which the Board has determined are reasonably expected to generate a return. This consolidated financial statement of the Company and its subsidiaries as listed below, were authorised for issue in accordance with the resolution of the Directors on 22 September. WCX M4 Pty Limited (WCX M4) WCX M5 Entities consist of the following: WCX M5 AT Pty Ltd WCX M5 PT Pty Ltd WCX M5 AHT Pty Ltd WCX M5 PHT Pty Ltd WCX M5 AT Pty Ltd as Trustee of WCX M5 Asset Trust (WCX M5 Asset Trust) WCX M5 PT Pty Ltd as Trustee of WCX M5 Project Trust (WCX M5 Project Trust) WCX M5 AHT Pty Ltd as Trustee of WCX M5 Asset Hold Trust (WCX M5 Asset Hold Trust) WCX M5 PHT Pty Ltd as Trustee of WCX M5 Asset Hold Trust (WCX M5 Project Hold Trust) WCX M5 Finco Pty Ltd (WCX M5 Finco) a) Basis of preparation The consolidated financial statements are general purpose financial statements and have been prepared in accordance with the requirements of the Corporations Act 2001, applicable Australian Accounting Standards (including the Australian Accounting Interpretations), the requirements of the Public Finance and Audit Act 1983 and Public Finance and Audit Regulation, and the Treasurer s Directions. SMC is classified as a for-profit entity for the purposes of the application of Australian Accounting Standards and under the NSW Treasury Policy TPP 05-4 Distinguishing For-Profit from Not-For-Profit Entities. The historical cost basis of accounting has been adopted except where otherwise stated. The current year includes WCX M5 Entities for the period from their respective incorporation dates to 30 June. In addition, the prior year comparative includes WCX M4 Pty Limited for the period 28 August 2014 to 30 June. Unless otherwise stated, all amounts are rounded to the nearest one thousand dollars () and expressed in Australian dollars. Judgements, key assumptions and estimates used by management are disclosed in the relevant notes to the consolidated financial statements.

17 Directors Report and Financial Statements 17 b) Principals of Consolidation These financial statements have been consolidated in accordance with Australian Accounting Standards AASB 10 Financial Statements. The consolidated financial statements comprise the financial statements of the Company and its wholly-owned subsidiaries, as at 30 June (collectively referred to as the group or the consolidated entity ). Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of a controlled entity ceases with the Group loses control of the controlled entity. Assets and liabilities, income and expenses of a controlled entity acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the controlled entity. Controlled entities Controlled entities are entities over which the Group has power to control, which is when the Group is exposed, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Controlled entities are fully consolidated when the Group has less than a majority of the voting or similar rights of an entity. All inter-entity balances and transactions between entities in the Group have been eliminated in full on consolidation. c) Segment reporting Operating segments are reported in a manner that is consistent with internal reporting provided to the chief operating decision maker. The chief operating decision maker has identified the Group operates in one segment. d) Statement of compliance The consolidated financial statements and accompanying notes comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). e) Going concern The consolidated financial statements have been prepared on the basis that the Group is expected to be able to pay its debts as and when they fall due and continue in operation without any intention or necessity to liquidate or otherwise wind up their operations. f) New or revised Australian Accounting Standards and Interpretations not yet adopted The Group did not early adopt any new accounting standards that are not yet effective. The following new accounting standards and interpretations have been published that are not mandatory for 30 June reporting period: AASB 9 Financial Instruments (effective for financial years commencing on or after 1 January 2018) AASB 9, published in July 2014, replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment of financial assets, and the new general hedge accounting requirements. It also carries forward guidance on recognition and de-recognition of financial instruments from AASB 139. The impact of AASB 9 is being considered. AASB 15 Revenue from Contracts with Customers (effective for financial years commencing on or after 1 January 2018) AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue and AASB 111 Construction Contracts. The impact of AASB 15 is being considered. AASB 16 Leases (effective for financial years commencing on or after 1 January 2019) AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases. This standard will predominately affect lessees, bringing all major leases on balance sheet. The impact of AASB 16 is being considered.

18 Directors Report and Financial Statements 18 Notes to the Financial Statements continued For the year ended 30 June 1. Summary of Significant Accounting Policies continued g) Critical accounting estimates and judgements The preparation of the consolidated financial statements require management to make judgements, estimates and assumptions that affect the amounts reported in the financial statements. The estimates and associated assumptions are based on factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. The main area where a high degree of judgement or complexity arises or where assumptions and estimates are significant to the financial statements are found in the following notes: Fair value of derivatives. Refer to note 18(c). Impairment testing of motorway concession assets under construction. Refer to note 10. Valuation techniques used, which involves estimates are discussed in detail in the relevant note(s). h) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised for the major business activities as follows: Interest income Interest income is recognised on an accruals basis using the effective interest rate method. Construction revenue During the construction phase of service concession infrastructure assets, the Group records an intangible asset which represents the right to charge users of the infrastructure and recognises construction revenue from the construction of the infrastructure. Revenue and expenses associated with construction contracts are recognised in accordance with the percentage of completion method. i) Construction Costs WCX M4 Pty Limited, a wholly owned subsidiary of the Company, holds the concession for the WestConnex Stage 1 motorway project which grants the company the right to design, build, operate and maintain WestConnex Stage 1 motorway for the concession period ending in Construction costs incurred in the development and management of the WestConnex Stage 1 motorway project are recognised in the consolidated Statement of Comprehensive Income and subsequently capitalised to intangible assets (assets under construction Stage 1) in the consolidated Statement of Financial Position. The WCX M5 Entities have been granted the tolling rights to the WestConnex Stage 2 M5 East and New M5 motorways. This right includes the operation, maintenance and repair of the motorway (O&M) until 31 December Construction costs incurred in the development and management of the WestConnex Stage 2 motorway project are recognised in the consolidated Statements of Comprehensive Income and subsequently capitalised to intangible assets (assets under construction Stage 2) in the consolidated Statement of Financial Position. Refer 1(n) for further details on intangible assets. j) Insurance The Project Deed with RMS requires WCX M4 Pty Limited to effect or cause to effect certain policies of insurance. Subsequent to this obligation, the project related insurances have been passed down through the Design and Construction (D&C) deed to the D&C Contractor under a contractor arranged insurance approach for the WestConnex Stage 1 M4 Widening and M4 East Road Projects. The Project Deed with Roads and Maritime Services (RMS) requires WCX M5 Asset Trustee to effect or cause to effect certain policies of insurance. Subsequent to this obligation, the project related insurances have been passed down through the Design and Construction (D&C) deed to the D&C Contractor under a contractor arranged insurance approach for the WestConnex Stage 2 New M5.

19 Directors Report and Financial Statements 19 k) Cash and cash equivalents Cash includes cash at bank and deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value and are held for the purpose of meeting short term cash commitments rather than for investment or other purposes. Term deposits with a term of 90 days or less from the date of inception are classified as cash equivalent. l) Trade and other receivables Trade and other receivable are initially recognised at fair value, usually based on the transaction cost or face value. Subsequent measurement is at amortised cost using the effective interest method, less any allowance for uncollectible amounts. Changes are recognised in the Statement of Comprehensive Income when trade and other receivables are impaired or de-recognised. Short term receivables with no stated interest rate are measured at the original invoice amount where the effect of discounting is immaterial. m) Property, plant and equipment Acquisition of assets Assets acquired are initially recognised at cost. Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire the asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the requirements of other Australian Accounting Standards. Capitalisation thresholds Expenditure on the acquisition, replacement or enhancement of property, plant and equipment is capitalised, provided it exceeds the capitalisation threshold. The capitalisation threshold for a network of property, plant and equipment items or for an individual (non-networked) item is $5,000. Impairment of assets At each reporting date, the carrying amounts of assets are reviewed to ensure that they represent fair value. If the carrying amount requires a valuation adjustment in order to represent fair value, this is carried out at the reporting date. In addition, the carrying amounts are reviewed to determine whether there is an indication of impairment. If any indication of impairment exists, a formal estimate of their recoverable amount is made. Where the carrying amount of an asset is greater than its recoverable amount, the asset is considered impaired. An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less cost of disposal and value in use. Impairment losses are recognised as an expense in profit or loss, unless an asset has previously been revalued through the asset revaluation reserve, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss. If the asset s carrying amount is greater than its estimated recoverable amount, the carrying amount is reduced to recoverable amount and the reduction is recognised as an impairment loss. Depreciation of property, plant and equipment Depreciation is provided for on a straight-line basis over the useful life of the assets. The depreciation charge for each period is recognised as an expense unless it is included in the carrying amount of another asset. In determining an asset s useful life consideration is given to its expected usage, its expected wear and tear, technical or commercial obsolescence and legal or similar limits on its use. The expected useful lives of items of property, plant and equipment are as follows: Computer and IT Hardware 3 5 Leasehold improvements over the life of the relevant lease

20 Directors Report and Financial Statements 20 Notes to the Financial Statements continued For the year ended 30 June 1. Summary of Significant Accounting Policies continued n) Intangible assets The Group recognises intangible assets only if it is probable that future economic benefits will flow to the Group and the cost of the asset can be measured reliably. Software Intangible assets are measured initially at cost and the cost is its fair value as at the date of acquisition. Development costs are only capitalised when certain criteria are met. Intangible assets are subsequently measured at fair value only if there is an active market. As there is no active market for the Group s intangible assets, the assets are carried at cost less accumulated amortisation and impairment losses. In determining the asset s useful life, consideration is given to its expected usage, technical, technological, commercial or other types of obsolesce, legal or similar limits on its use, and whether its life is dependent on the useful life of other assets. The expected useful life of an item of software ranges between 2 and 5 years. Software is amortised on a straight-line basis over its estimated useful life commencing when the item is available for use. All research costs are expensed. Concession assets under construction WCX M4 Pty Limited and WCX M5 Entities respectively hold the concession for the WestConnex Stage 1 and Stage 2 motorway project which grants the entities the right to design, build, operate and maintain WestConnex motorway for the concession period ending in At the end of the concession period, all concession assets are to be returned to the New South Wales Government Roads and Maritime Services. Management judgement is required in the assessment of the types of costs that are directly attributable to the increase in value of the intangible asset. Satisfying the directly attributable criteria requires an assessment of those unavoidable costs that, if not incurred, would result in the intangible asset not being constructed. Costs include cost of materials, services, direct labour and an appropriate portion of overheads. Attributable overheads are allocated to the cost of construction of an asset using direct labour cost. Concession assets such as the right to future toll revenue will be amortised over the period of expected future benefits once the motorway is fully constructed and operational. Useful lives of these assets are finite. Intangible assets not yet available for use are subject to an annual review of impairment. Intangible assets in use are tested for impairment where an indicator of impairment exists. If the recoverable amount is less than its carrying amount, the carrying amount is reduced to the recoverable amount and the reduction is recognised as an impairment loss. An intangible asset is de-recognised either on disposal or when its service potential ceases and it is not expected to have any disposal value. On de-recognition any gain or loss is recognised in the consolidated Statement of Comprehensive Income. Impairment Testing At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes an estimate of the recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Where the carrying amount of an intangible asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount through profit or loss. The decrement in the carrying amount is recognised as an expense in profit or loss in the reporting period in which the impairment occurs. The recoverable amount of the Group s cash generating units have been determined based on value-in-use calculations. o) Investments in subsidiaries Investments in subsidiaries are accounted for at cost less impairment losses, if any, in the financial statements of the parent entity. On disposal of such an investment, the difference between the net disposal proceeds and its carrying amount is included in Statement of Comprehensive Income.

21 Directors Report and Financial Statements 21 p) Impairment of financial assets All financial assets, except those measured at fair value through profit and loss, are subject to an annual review for impairment. An allowance for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due. For financial assets carried at amortised cost, the amount of the allowance is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the impairment loss is recognised in the consolidated Statement of Comprehensive Income. q) Other assets Other assets including prepayments are recognised on a historic cost basis. r) Trade and other payables These amounts comprise trade creditors and accrued expenses owing by the Group at reporting date and represent liabilities for goods and services received by Group prior to the end of the financial year which remain unpaid. Payables are unsecured and are usually paid within 30 days of recognition. Payables are recognised initially at fair value, usually based on the transaction cost or face value and subsequently measured at amortised cost using the effective interest method. Short-term payables with no stated interest rate are measured at original invoice amount where the effect of discounting is immaterial. s) Employee benefits and other provisions Salaries and wages, annual leave, sick leave and on-costs Liabilities for wages and salaries (including non-monetary benefits) and annual leave are recognised in payables within accrued employee entitlements and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that is expected to be settled within 12 months from reporting date are recognised in respect of employees services are up to reporting date and included as current liabilities in the consolidated Statement of Financial Position. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Employee benefit on-costs are included in accrued employee entitlements in the consolidated Statement of Financial Position and employee expenses in the consolidated Statement of Comprehensive Income when the employee entitlements to which they relate are recognised. Long service leave and superannuation Long Service Leave is measured at present value in accordance with AASB 119 Employee Benefits. Liabilities for long service leave are recognised when employees reach a qualifying period of continuous service and are measured at the amount expected to be settled within 12 months from reporting date. Any amount which is expected to be payable after 12 months from reporting date is measured as the present value of expected future payments. Consideration is given to future wage and salary levels, experience of employee departures and periods of service and discounted using the 10-year Australian Government bond rate at reporting date, with terms to maturity that match, as closely as possible, the estimated future cash flows. The Group has recognised employee leave entitlement balances transferred from New South Wales Treasury, Road and Maritime Services and Transport for NSW. The Group has no unfunded superannuation liability. Superannuation is contributed to plans as nominated by the employee. The cost of current employee contributions to employee contribution plans are charged to the consolidated Statement of Comprehensive Income. Consequential on-costs Consequential costs to employment are recognised separately as liabilities and expenses where the employee benefits to which they relate have been recognised. This includes outstanding amounts of payroll tax, workers compensation insurance premiums and fringe benefits tax. Other provisions Other provisions exist when the Group has a present legal or constructive obligation as a result of a past event; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

22 Directors Report and Financial Statements 22 Notes to the Financial Statements continued For the year ended 30 June 1. Summary of Significant Accounting Policies continued t) Income tax Income tax The Company and its subsidiaries are exempt from income tax as a State/Territory Body under Division 1AB in Part III of the Income Tax Assessment Act 1936 (ITAA 1936). Tax equivalent regimes The Company and its subsidiaries are exempt from the National Tax Equivalent Regime (NTER) and the State Tax Equivalent Regime (STER), pursuant to an exemption granted by the NSW Premier. u) Goods and Services Tax (GST) Income, expenses and assets are recognised net of the amount of GST, except that the: Amount of GST incurred by the Group as a purchaser that is not recoverable from the Australian Taxation Office is recognised as part of an asset s cost of acquisition or as part of an item of expenses; Receivables and trade payables are stated with the amount of GST included; and Cash flows are included in the consolidated Statement of Cash Flows on a gross basis. However, the GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to the Australian Taxation Office are classified as part of operating cash flows. v) Financial instruments Financial instruments are contracts that give rise to both a financial asset of one entity and a financial liability (or equity instrument) of another entity. They include cash and cash equivalents, receivables, payables, and borrowings. Recognition A financial asset or financial liability is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the associated cash flows expire, are effectively transferred, or are otherwise lost. Financial liabilities are de-recognised when the contractual obligation is discharged, is cancelled, or expires. Any applicable amortisation, impairment loss (or reversal), or fair value adjustment is recognised in the consolidated Statement of Comprehensive Income. On de-recognition, any difference between financial assets and liabilities carrying amount and the consideration received or paid is recognised in the consolidated Statement of Comprehensive Income. Measurement Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available for sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company s financial liabilities include trade and other payables, borrowings and derivative financial instruments. After initial recognition, receivables, payables, loans and borrowings are carried in the consolidated Statement of Financial Position at amortised cost and derivative financial measurements are carried at fair value.

23 Directors Report and Financial Statements 23 w) Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement The Group uses derivative financial instruments such as interest rate swaps to hedge its interest rate risk. Such derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. For the purpose of hedge accounting, hedges are classified as: Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment Hedges of a net investment in a foreign operation. At inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for the undertaking of the hedge. The documentation includes the identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument fair value in offsetting the exposure to changes in the hedged item s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial periods for which they have been designated. Hedges that meet the strict criteria for hedge accounting are accounted for, as described below: Cash flow hedges The effective portion of the gain or loss on the derivative is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the Statement of Comprehensive Income. If the derivative no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised without replacement or rollover, or the hedge designation revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the underlying forecast transaction occurs. When the hedged item is the cost of a non-financial asset, the amount recognised in equity is transferred to the carrying amount of the non-financial asset when it is recognised. In other cases, the amount recognised in equity is transferred to the profit or loss in the same period of the hedged item affects the profit or loss. Derivatives that do not qualify for hedge accounting Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the profit or loss. Fair value estimation The fair value of financial instruments traded in active markets is based on quoted market prices at reporting date. The fair value of instruments that are not traded in an active market is determined by the Group using valuation techniques based on assumptions, and market conditions existing at reporting date. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. x) Loans and borrowings Loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, these financial liabilities are stated at amortised cost, with any difference between cost and redemption value being recognised in the profit or loss over the period of the loans and borrowings on an effective interest basis. Interest and other borrowing costs are recognised as expenses in the period in which they are incurred, unless they relate to qualifying assets, in which case they are capitalised as part of the cost of those assets. Capitalisation of borrowing costs is undertaken where a direct relationship can be established between the borrowings and the relevant projects giving rise to qualifying assets. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is net of any interest earned on those borrowings. y) Leases Leases where the lessor retains substantially the risks and benefits of ownership of the asset are classified as operating leases. Net rental payments for operating leases are recognised as an expense in the consolidated Statement of Comprehensive Income on a straight-line basis over the period of the lease.

24 Directors Report and Financial Statements 24 Notes to the Financial Statements continued For the year ended 30 June 2. Construction revenue Construction revenue 1,518, ,688 Total construction revenue 1,518, ,688 Construction revenue is recognised during the construction phase of an intangible asset. 3. Construction costs Design and Construction costs 1,377, ,162 Pre-development costs 78,380 Professional services contracts 27,656 42,775 Other project costs 1,579 2,751 Total construction costs 1,485, ,688 Construction costs cover all contracted Design and Construction (D&C) payments, all pre-construction development costs and any other project costs attributable to the assets under construction. The costs are recognised in accordance with the percentage of completion method. Other costs include all directly attributable costs of the projects, including an appropriate allocation of overheads. 4. Employee related costs Salaries and wages (including annual leave) 13,917 1,309 9,240 1,309 Contractors 8, , Superannuation defined contribution Long service leave Other employee related expenses 3, , Amounts recharged to project (1,507) (1,507) Total employee related costs 27, ,

25 Directors Report and Financial Statements Other operating expenses Audit of financial statements Environment Impact Survey costs 9,871 9,871 Professional services 16, , Office accommodation and support 1, , IT costs 2,013 2,013 Consultants 1,132 Other costs 3, , Total other operating expenses 34, , Finance costs Commitment fees 7,235 Agency fees 90 Borrowing costs capitalised to qualifying asset (7,325) Other fees 18 Total finance costs Cash and cash equivalents Cash at bank 452,069 54, ,351 53,612 Term deposits 410, , , ,000 Total cash and cash equivalents 862, , , ,612 Cash at bank earns interest at floating rates based on daily bank deposit rates. The carrying amounts of cash and cash equivalents represent fair value. Term deposits are made for varying periods, depending on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates. The amount shown in cash and cash equivalents includes $38.5m not available for general use at 30 June (: nil). This comprises amounts required to be held under maintenance and funding reserves, the use of which is subject to certain conditions.

26 Directors Report and Financial Statements 26 Notes to the Financial Statements continued For the year ended 30 June 8. Trade and other receivables Goods and Services Tax (GST) receivable 60,915 16,531 2,286 5,648 Roads and Maritime Services 10,033 10,033 Intercompany WCX M4 Pty Limited 1,386 2,703 Intercompany WCX M5 Project Trust 2,460 Accrued interest 1, Prepayments Other Total current trade and other receivables 72,455 17,165 17,547 8, Property, plant and equipment Computer hardware Leasehold improvements Total Cost 132 3,374 3,506 Accumulated depreciation and impairment (54) (263) (317) Net carrying amount at 30 June 78 3,111 3,189 Cost Accumulated depreciation and impairment (11) (11) Net carrying amount at 30 June Movement in property, plant and equipment Balance at 1 July Additions Revaluation increment less revaluation decrements Depreciation expense (11) (11) Net carrying amount at 30 June Additions 2 3,374 3,376 Revaluation increment less revaluation decrements Depreciation expense (43) (263) (306) Net carrying amount at 30 June 78 3,111 3,189

27 Directors Report and Financial Statements 27 Computer hardware Leasehold improvements Total Cost 132 3,161 3,293 Accumulated depreciation and impairment (54) (263) (317) Net carrying amount at 30 June 78 2,898 2,976 Cost Accumulated depreciation and impairment (11) (11) Net carrying amount at 30 June Movement in property, plant and equipment Balance at 1 July Additions Revaluation increment less revaluation decrements Depreciation expense (11) (11) Net carrying amount at 30 June Additions 2 3,161 3,163 Revaluation increment less revaluation decrements Depreciation expense (43) (263) (306) Net carrying amount at 30 June 78 2,898 2,976

28 Directors Report and Financial Statements 28 Notes to the Financial Statements continued For the year ended 30 June 10. Intangible assets Concession assets Service Concession Arrangements have been accounted for in accordance with AASB Interpretation 12 and as such the concession assets have been classified as Intangible Assets. As at 30 June the Group is responsible for WestConnex Stage 1 (the scope of which includes widening of the existing M4 motorway and the construction of the new M4 East motorway) and WestConnex Stage 2 (the scope of which includes construction and maintenance services of the new M5 in accordance with the Project Deed). The concession for Stage 1 of the project is held by WCX M4 Pty Limited which grants the company the right to design, build, operate and maintain Stage 1 motorway for the concession period. The concession for Stage 2 of the project is held by WCX M5 Asset Trust which grants the company the right to design, build, operate and maintain Stage 2 motorway for the concession period ending in Software Asset under Construction Stage 1 Asset under Construction Stage 2 Total Cost 29 1,024, ,402 1,745,596 Accumulated amortisation and impairment (11) (11) Net carrying amount at 30 June 18 1,024, ,402 1,745,585 Cost ,688 55, ,015 Accumulated amortisation and impairment (1) (1) Net carrying amount at 30 June ,688 55, ,014 Movement in intangible assets Balance at 28 August 2014 Additions ,688 55, ,015 Impairment losses Amortisation (1) (1) Net carrying amount at 30 June ,688 55, ,014 Additions 1 862, ,103 1,528,581 Impairment losses Amortisation (10) (10) Net carrying amount at 30 June 18 1,024, ,402 1,745,585

29 Directors Report and Financial Statements 29 Software Asset under Construction Stage 1 Asset under Construction Stage 2 Total Cost Accumulated amortisation and impairment (11) (11) Net carrying amount at 30 June Cost 28 55,299 55,327 Accumulated amortisation and impairment (1) (1) Net carrying amount at 30 June 27 55,299 55,326 Movement in intangible assets Balance at 28 August 2014 Additions 28 55,299 55,327 Impairment losses Amortisation (1) (1) Net carrying amount at 30 June 27 55,299 55,326 Transfer of Stage 2 related intangibles (78,341) (78,341) Additions 1 23,042 23,043 Impairment losses Amortisation (10) (10) Net carrying amount at 30 June Concession assets under construction Concession assets under construction represent the Group s right to operate roads under Service Concession Arrangements. All concession assets are classified as intangible assets and once completed and ready for use, will be amortised on a straight line basis over the term of the right to operate the asset. At the end of the concession period, all concession assets are to be returned to New South Wales Government Road and Maritime Services. Impairment testing of motorway concession assets under construction At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes an estimate of the recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units or CGUs). Where the carrying amount of an intangible asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount through profit or loss. The decrement in the carrying amount is recognised as an expense in profit or loss in the reporting period which the impairment occurs. The recoverable amount of the Group s cash generating units have been determined based on value-in-use calculations. The following paragraph and table sets out the key assumptions on which management has based its cash flow projections. These have been considered by the Board for the purposes of impairment testing. The calculations use cash flow projections based on the relevant investment cases approved by the Board. A long term CPI annual growth rate of 2.5% (: 2.5%), a long term average weekly earnings (LTAWE) annual growth rate of 3.5% (: 3.5%) have been used in the calculations. Operating and maintenance costs are escalated in line with a combination of the CPI and LTAWE annual growth rates. The Group has applied post-tax discount rates to discount the forecast future attributable post tax cash flows. The equivalent pre-tax nominal discount rate ranges of 9.75% to 10.90% have been applied for WCX M4 Pty Limited and 9.25% to 10.30% for WCX M5 entities.

30 Directors Report and Financial Statements 30 Notes to the Financial Statements continued For the year ended 30 June 10. Intangible assets continued The Board has determined the values assigned to each of the above key assumptions as follows: Assumption Traffic volume Long term CPI (% annual growth) Long term average weekly earnings (% annual growth) Post-tax discount rate Approach used to determine values Based on the project entities long term traffic forecasting models Based on independent external forecasts Based on independent external forecasts Discount rates consider specific risks relating to the CGU. In performing the value-in-use calculations for each CGU, the Group has applied post-tax discount rates to discount the forecast future attributable post tax cash flows. The equivalent pre-tax rates are disclosed above. Key Estimates The Group makes certain assumptions in calculating the recoverable amount of its intangible assets. These include assumptions around expected traffic flows and forecast operational costs. In performing the value-in-use calculation, the Group has applied the assumptions noted above. The Board does not consider that any reasonable possible change in the assumptions will result in the carrying value of a CGU exceeding its recoverable amount as at 30 June. 11. Investment in subsidiaries Name of Entity Country of establishment Principal activities Ownership interest % WCX M4 Pty Limited Australia Delivery of the WestConnex Stage 1 motorway 100 1,057,997 69,078 WCX M5 Project Hold Trust Australia Delivery of the WestConnex Stage 2 motorway WCX M5 Asset Hold Trust Australia Delivery of the WestConnex Stage 2 motorway ,300 WCX M5 Project Trust Australia Delivery of the WestConnex Stage 2 motorway 100 WCX M5 Asset Trust Australia Delivery of the WestConnex Stage 2 motorway 100 WCX M5 AT Pty Ltd 1 Australia Trustee 100 WCX M5 PT Pty Ltd 1 Australia Trustee 100 WCX M5 AHT Pty Ltd 1 Australia Trustee 100 WCX M5 PHT Pty Ltd 1 Australia Trustee 100 WCX M5 Finco Pty Ltd Australia Financing company 100 Total investments in subsidiaries 1,898,298 69, The Trustee Companies have been established with a share capital of $10 each.

31 Directors Report and Financial Statements Other assets Deferred finance cost Syndicated Facility Agreement 7,565 Total current other assets 7,565 Deferred finance cost Syndicated Facility Agreement 18,685 Total non-current other assets 18,685 Deferred finance cost relates to establishment costs incurred in connection with obtaining the Syndicated Facility Agreement. As at 30 June, the consolidated group had no drawn debt. As a result, the establishment cost has been recognised as a deferred asset and will be amortised at the commencement of the draw down which is expected to take place in July. 13. Trade and other payables Trade Creditors 2,764 2,147 Unearned revenue 6,500 Inter-entity WCX M4 Pty Limited 541 Design, construction and development costs 267,166 99,405 9,951 Other project accruals 11,133 11,133 WestConnex Delivery Authority recharge 11,910 Accrued salaries, wages and on-costs Other 7,328 1,567 5,911 1,407 Total current trade and other payables 295, ,336 20,255 11,812 Due to the short-term nature of current trade and other payables, their carrying value is deemed to approximate their fair value.

32 Directors Report and Financial Statements 32 Notes to the Financial Statements continued For the year ended 30 June 14. Provisions Employee benefits and related on costs Employee benefits annual leave Employee benefits long service leave Employee benefits other 2,424 1,513 Total current provisions 3, , Employee benefits and related on costs Employee benefits long service leave Employee benefits other Total non-current provisions 1, Aggregate employee benefits and related on-costs Provisions current 3, , Provisions non-current 1, Accrued salaries, wages and on-costs (note 13) Total employee benefits and related on-costs 5, , Included in this amount is $93k which is not expected to be settled within 12 months of balance date. 15. Derivative financial liabilities Cash flow hedge 121,016 Total non-current derivative financial liabilities 121,016 Please refer to Note 18(e) for details of the interest rate swaps entered into on 20 November.

33 Directors Report and Financial Statements Issued capital and parent Shares 000 s Shares 000 s Fully paid shares Opening balance 940, ,000 Issued 625, , , ,000 Partially paid shares Opening balance Partly paid 821, ,157 Balance at 30 June 2,386, ,000 2,386, ,000 Sydney Motorway Corporation Pty Limited was established as a company on 28 August Shares are held by the NSW Treasurer and the portfolio Minister (Minister for Roads, Maritime and Freight) as voting shareholders. 17. Reserves Interest rate swap cash flow hedge 121,016 Total reserves 121,016 The hedge reserve comprises the effective portion of the cumulative net change in the fair value of the cash flow hedging instruments related to hedged transactions. 18. Financial instruments a) Capital Management The Group s overall risk management program focuses on ensuring compliance with the Group s Constitution(s). Capital and financial risk management is carried out by the Group through the Treasury function. SMC s Treasury function identifies, evaluates and hedges financial risks which are presented to the Board for approval, after endorsement by the Audit & Risk Committee (ARC). On an annual basis, the Group s capital management strategy is reviewed and adjusted where necessary by SMC s Treasury function and presented to the Board for approval. This strategy includes the debt and hedging strategy overview for the Group. The Group s objective when managing its capital requirements is to maintain an optimal capital structure, while ensuring that the compliance with capital requirements of the Constitution, regulatory authorities and lenders, and continues to operate as a going concern. There have been no breaches of the financial covenants of any interest bearing loans and borrowings during the year as no debt has been drawn down. No changes were made in the objectives, policies or processes for the managing of capital during the year. b) Overview Financial instruments comprise cash, trade debtors, trade creditors, derivatives, loans and borrowings and short term deposits. The main purpose of these financial instruments is to manage the Group s operations and to invest surplus cash. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Group s main risks arising from financial instruments together with the entity s objectives, policies and processes for measuring and managing risk, quantitative and qualitative disclosures are included throughout these financial statements. The Board has overall responsibility for the establishment and oversight of risk management and reviews and agrees policies for managing each of these risks. Risk management policies are established to identify and analyse the risks faced by the entity, to set risk limits and controls and to monitor risks.

34 Directors Report and Financial Statements 34 Notes to the Financial Statements continued For the year ended 30 June 18. Financial instruments continued c) Fair values The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. Due to the short-term nature of the current receivables, their carrying value is assumed to approximate their fair value and based on credit history it is expected that the receivables that are neither past due nor impaired will be received when due. The Group does not own any land or building. The current holding of Property, Plant and Equipment is operational equipment with useful lives of 3 years or less. Management has reviewed and concluded that the written down value of these assets approximate their fair value. The fair value of interest rate swaps is calculated using the present value of estimated future cash flows. The fair value for this instrument used market observable inputs (Level 2). A number of the Group s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. When measuring fair value, the valuation technique used maximises the use of relevant observable inputs and minimises the use of unobservable inputs. Under AASB 13 Fair Value Measurement, the entity categorises, for disclosure purposes, the valuation techniques based on the inputs used in the valuation techniques as follows: Level 1 quoted prices in active markets for identical assets / liabilities that the entity can access at the measurement date. Level 2 inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly. Level 3 inputs that are not based on observable market data (unobservable inputs). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: In the principal market for the asset or liability; or In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that the market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. The estimates and assumptions that have a significant risk of causing a material adjustment relate to the Groups interest rate swaps. The interest rate swaps were taken out under the expectation that there would be a highly probable refinancing event at the maturity of the syndicated bank loan. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. The carrying value of the Group s financial assets and liabilities approximate fair value. The carrying amounts shown in the statement of financial position, are presented as follows: Carrying amount Carrying amount Note Financial assets Cash and cash equivalents 7 862, , , ,612 Trade and other receivables 8 11, ,886 3,186 Financial liabilities Trade and other payables , ,336 20,255 11,812 Interest rate swaps ,016 Note: Financial assets and liabilities exclude Goods and Services Tax, unearned revenue and prepayments which are not within the scope of AASB 7.

35 Directors Report and Financial Statements 35 d) Financial risk The operational activities of the Group expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate risk). A risk management program focuses on financial performance and seeks to minimise potential adverse effects from financial market price movements. Methods used to measure risk include sensitivity analysis in the case of interest rate and an analysis of future commitments for liquidity risk. Risk management is carried out under Treasury risk policies. The Group s Treasury Risk Policy Framework establishes a prudential framework covering policies, best practice internal controls and reporting systems for the management of financial risks. The Group s Treasury Risk Policy Framework covers specific areas of financial risk including, interest rate risk, credit risk and hedging, use of derivative financial instruments, liquidity and investment of excess funds. The primary objective of this policy is to achieve management of all financial risks in strict compliance with internal policies and guidelines within the broad framework of the Public Authorities (Financial Arrangements) Act 1987 (PAFA) Act and the Corporations Act 2001 (Cth). e) Market risk Market risk relates to fluctuations in the fair value of future cash flows of financial instruments because of changes in market prices. This applies to the Group s interest rate risk. The Group is not exposed to foreign exchange risk as all significant contractual commercial transactions are denominated in local currency. The group uses derivative financial instruments to hedge market risks where appropriate. Generally, the group seeks to apply hedge accounting principles in respect of derivative instruments. Interest rate risk Interest rate risk refers to the market value of financial instruments or cash flows associated with the instruments fluctuating due to changes in market yields. The Group s main interest rate risk relates primarily to cash at bank, current investments and borrowings. The Group borrows at floating rates of interest and holds cash or short-term investments that earn interest at floating rates, consequently cash flows are exposed to the impact of adverse changes in benchmark interest rates. The Group manages its interest rate exposures by maintaining a policy to combine fixed and floating rate liabilities, through the use of approved derivative instruments, such as interest rate swaps, and entry into fixed rate borrowings. Fixed rate borrowings and receivables are carried at amortised cost. They are therefore not subject to interest rate risk as defined by AASB 7, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates. Interest rate swaps On 20 November the Group entered into interest rate swap agreements with a notional amount of $1.5 billion (: $nil). The Group s policy is to manage its interest rate risk by entering into interest rate swap contracts in respect of its floating rate debt. The notional amount of interest rate derivative contracts that were in place at 30 June was $1.5 billion (: $nil). All outstanding derivative interest rate swap contracts have been stated at their fair value at the reporting date.

36 Directors Report and Financial Statements 36 Notes to the Financial Statements continued For the year ended 30 June 18. Financial instruments continued e) Market risk continued Interest rate swaps continued The following table demonstrates the sensitivity to a reasonably possible change in interest rates on Group s financial assets and financial liabilities. With all other variables held constant, the Group s profit is affected as follows: Weighted average effective interest rate % Carrying amount Change as a result of +1% movement in interest rate Profit Equity Change as a result of -1% movement in interest rate Profit Equity Financial assets Cash at bank ,069 4,521 4,521 (4,521) (4,521) Short-term investments ,000 4,100 4,100 (4,100) (4,100) Financial liabilities Interest rate swaps ,016 86,681 86,681 (101,457) (101,457) Financial assets Cash at bank , (544) (544) Short-term investments ,000 7,750 7,750 (7,750) (7,750) Financial assets Weighted average effective interest rate % Carrying amount Change as a result of +1% movement in interest rate Profit Equity Change as a result of -1% movement in interest rate Profit Equity Cash at bank ,351 1,104 1,104 (1,104) (1,104) Short-term investments ,000 4,100 4,100 (4,100) (4,100) Financial assets Cash at bank , (536) (536) Short-term investments ,000 7,750 7,750 (7,750) (7,750) f) Credit risk Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. Market prices generally incorporate credit assessments into valuations and risk of loss is implicitly provided for in the carrying value of financial assets and liabilities when valued at fair value. The maximum exposure to credit risk at reporting date is therefore the carrying amount of financial assets recognised in the Statement of Financial Position. Credit risk is limited in relation to cash and cash equivalents and receivables as counterparties are banks with high credit ratings or government agencies. In respect of cash and cash equivalents, and investments in marketable securities the Group only deals with creditworthy counterparties and recognised financial intermediaries as a means of mitigating against the risk of financial losses from defaults. Policies are in place to monitor the credit ratings of counterparties and to limit the amount of funds placed with those counterparties, depending on their credit rating. In addition, only highly liquid marketable securities are used for investment purposes. Credit risk associated with the Group s financial assets, other than receivables, is managed through the sound selection of counterparties and establishment of minimum credit rating standards. The Company s maximum exposure for credit risk is the carrying amount of all cash assets, long term deposits, trade and other receivables and derivative balances. There are no financial assets past due or impaired. The Group does not hold any collateral and has not granted any financial guarantees.

37 Directors Report and Financial Statements 37 g) Liquidity risk Liquidity risk refers to the Group being unable to meet its payment obligations when they fall due. The Group manages risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. During the year, there have been no defaults or breaches on any amounts payable. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Liabilities are recognised for amounts due to be paid in the future for goods and services received, whether or not invoiced. If trade terms are not specified, payment is generally made no later than the end of the month following the month in which an invoice or a statement is received. On 20 November, the WCX M5 Finco Pty Ltd entered into a $1.5 billion Senior Syndicated Facility Agreement and a $2 billion Subordinated Commonwealth Loan Agreement. The Company entered into On-Loan Agreements with the parent, WCX M5 Asset Trust on substantially the same terms with those issued under the Senior Syndicated Facility and Subordinated Commonwealth Loan Agreements. As at 30 June, the company had not yet commenced drawdowns on either of these loans. The following table(s) provide the maturity profiles of the Groups financial liabilities: Within one year 1-5 years > 5 years Total Non-derivatives Trade and other payables 288, ,914 Derivatives Interest rate swaps 1 4,290 76,103 71, , The above amount does not equal the carrying value as this amount is based on undiscounted cash flows whereas the carrying value is based on discounted cash flows. Non-derivatives Trade and other payables 113, ,336 Derivatives Interest rate swaps Within one year 1-5 years > 5 years Total Non-derivatives Trade and other payables 20,255 20,255 Non-derivatives Trade and other payables 11,812 11,812

38 Directors Report and Financial Statements 38 Notes to the Financial Statements continued For the year ended 30 June 19. Related party disclosures The Group has related party relationships with key management personnel (refer (a) below) and their related entities (refer (b) below). a) Key management personnel compensation Key management personnel (KMP) are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. This comprises all directors, whether executive or non-executive, and senior executives who lead, direct and control functions of the parent entity or the Group. Key management personnel compensation is as follows: Short-term employee benefits 5,476 1,418 3,800 1,418 Post-employment benefits Other long-term benefits Total compensation 5,643 1,486 3,923 1,486 Senior executives 5,151 1,214 3,431 1,214 Directors non-executive Total compensation 5,643 1,486 3,923 1,486 The above includes all amounts paid and payable for employee benefits during the reporting period. The compensation paid to senior executives who also serve as executive directors has been included in the senior executive category as they are not compensated separately for their directorship services. The increase in the KMP compensation from to is largely due to the significant growth in size and activities of SMC between FY15 and FY16. In SMC comprised of a limited number of roles as the project procurement, project delivery and project management functions were sitting within a separate entity, WestConnex Delivery Authority (WDA). Following the transfer of WDA s procurement and project management functions to SMC from 1 October, there was a significant increase in the total number of SMC staff and KMP roles, reflecting the merged SMC business. In addition, the KMP figures reflect part year costs only as SMC commenced operation part way through the year and KMP personnel were employed progressively through the year. The figures reflect the impact of annualised, full-year costs. On a comparable basis, total FY16 KMP costs reflect a relatively small increase from FY15. In addition to the reasons noted above under, the increase in KMP costs at a consolidated level includes all KMP within SMC s subsidiary entities. The values therefore represent additional project company KMP, additional KMP in total and the full year impact of some KMP in. On a comparable basis, total FY16 KMP costs reflect a relatively small increase from FY15. b) Other transactions with key management personnel and related entities Roads and Maritime Services (RMS) is a NSW statutory authority established on 1 November 2011 under the Transport Legislation Amendment Act RMS is responsible for implementing strategy and delivering essential frontline services to people who use roads, harbours and waterways. RMS is the custodian of Sydney s roads and motorway network and its activities are overseen by the NSW Minister for Roads, Maritime and Freight. RMS has granted SMC the right to undertake design and construction, operation and maintenance of the WestConnex Stage 1 and Stage 2 projects.

39 Directors Report and Financial Statements 39 WestConnex Delivery Authority (WDA) was established by the NSW State Government to manage the development and delivery of the WestConnex motorway. WDA was overseen by a majority independent board, reporting to the NSW Minister for Roads, Maritime and Freight. The NSW Government decided to refine the responsibilities of RMS and the Company for the delivery of WestConnex Project. As a result, a number of activities previously managed by WDA were transferred progressively to the Group during -16. Directors some Directors of the Company were also Directors of other companies. A declaration of Directors conflict of interests is provided at the start of each Board or Committee meeting. During the year, the Company has not been a party to any material transaction, or proposed transactions, in which any member of the key management personnel (including directors, any other executive officer and senior manager) had or was to have a direct or indirect material interest. Inter-entity related transactions Stage 2 pre-construction development funding WCX M5 Asset Trust paid $88.4m to SMC for the costs funded by SMC for the pre-construction development costs of the New M5 project. The New M5 project has a budgeted total cost of $4,335m. The New M5 Development costs of $88m cover the development, procurement and financing of the project during 2014/15 and through to financial close in November. Project development and procurement costs include technical advice, geotechnical works, commencement of the remediation of the Alexandria Landfill, air quality monitoring, environmental advice, traffic advice, legal advice and accounting advice; as well as corporate support costs including management, accounting, HR, legal, procurement, communications, IT and property. Financing costs include legal, financial advisory, due diligence and accounting fees. Management Services Agreement (MSA) between SMC and WCX M5 Project Trust A Management Service Agreement (MSA) exists between SMC and WCX M5 Project Trust for the purpose of reimbursing SMC for corporate services and management costs incurred by SMC on behalf of the New M5 project and payable by WCX M5 Project Trust. These include corporate support services, general management services, environmental impact statement (EIS) costs and other specific reimbursable costs. During the financial year, a total of $19.3m was charged by the company to WCX M5 Project Trust, of which $9.9m was in relation to EIS costs. Intra Group Management Services Agreement (IG-MSA) between WCX M5 Project Trust, WCX M5 Asset Trust and WCX M5 Finco An IG-MSA exists between WCX M5 Project Trust, WCX M5 Asset Trust and WCX M5 Finco for the purpose of reimbursing WCX M5 Project Trust for corporate services and management costs incurred on behalf of WCX M5 Asset Trust and WCX M5 Finco. These include corporate support services, general management services, EIS costs and other specific reimbursable costs. During the financial year, a total of $14.7m and $1.5m was charged by WCX M5 Project Trust to WCX M5 Asset Trust and WCX M5 Finco respectively. Design, Construction and Asset Renewal Management Services Agreement (DCAR-MSA) between WCX M5 Project Trust and WCX M5 Asset Trust A DCAR agreement exists between WCX M5 Project Trust and WCX M5 Asset Trust for all services necessary to allow WCX M5 Asset Trustee to manage the discharge of its design, construction and asset renewal obligations under the project documents and any related contractual arrangements and any other services directed by WCX M5 Asset Trust. During the financial year, a total of $3.6m was charged by WCX M5 Project Trust to WCX M5 Asset Trust in relation to DCAR costs. Corporate recharges between SMC and WCX M4 Corporate services and management costs are charged by the parent entity to WCX M4 in line with an agreed budget. During the financial year, a total of $11.4m was charged by SMC to WCX M4. Of this amount, $9.2m was for the M4 East project and $2.2m was in relation to M4 widening project.

40 Directors Report and Financial Statements 40 Notes to the Financial Statements continued For the year ended 30 June 20. Operating lease commitments Non-cancellable operating lease rentals are payable as follows: Within one year 2,261 2,043 Later than one year but no later than five years 8,208 7,807 Later than five years 10,469 9,850 SMC and its controlled subsidiaries lease properties under non-cancellable operating leases expiring between four and five years. 21. Capital commitments The Group has signed contracts for project work relating to WestConnex Stage 1 and Stage 2. Future minimum payments under non-cancellable contracts but not recognised as liabilities are as follows: Within one year 2,110, ,733 Later than one year but no later than five years 3,539,925 1,986,653 Later than five years 66, Contingencies 5,716,995 2,876,386 As at 30 June, claims have been received with respect to WCX M5 entities. The validity of these claims are currently being assessed and cannot be reliably measured. Roads and Maritime Services (RMS) has been notified of upstream claims in accordance with requirements of the Project Deeds and the claims have been disclosed to WCX M5 lenders in accordance with debt documentation. Finalisation of these matters are subject to discussion and negotiation.

41 Directors Report and Financial Statements Reconciliation of profit for the year to cash flows from operating activities Profit for the year 12,517 10,203 19,441 10,183 Adjustments for non-cash items Depreciation and amortisation Other gain (10,000) (Increase)/decrease in assets (Increase)/decrease in receivables (55,290) (17,165) (8,564) (8,983) (Decrease)/increase in liabilities (Decrease)/Increase in payables 33,759 14,996 8,273 1,787 (Decrease)/Increase in provisions 5, ,031 6 Net cash flows (used in)/from operating activities (3,564) 8,052 12,497 3, Subsequent events WCX M4 Pty Limited entity is in the process of being restructured from a single entity into a dual flow-through trust structure similar to the WCX M5 group. This is expected to be implemented in the last quarter of this year. SMC has commenced work to obtain a limited recourse debt facility for the M4 concession. It is seeking to raise up to $1.8 billion with financial close targeted for late. Post reporting date, a claim has been received with respect to WCX M4 Pty Limited. The validity of this claim is currently being assessed. Roads and Maritime Services (RMS) has been advised of this claim in accordance with requirements of the Project Deed. Finalisation of this matter is subject to further discussions and negotiation. On 22 July, WCX M5 Finco Pty Ltd effected the drawdown of funds under the Senior Syndicated Facility Agreement and Subordinated Commonwealth Loan Agreement. There have been no other matters or circumstances occurring subsequent to the end of the financial year, that have significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future years except those mentioned in the review and results of operations of this Report. 25. Auditor s remuneration Statutory audit of financial statements Total amounts paid and payable to auditor SMC as the parent of WCX M4 and WCX M5 Entities pays the audit fees on behalf of those entities. The increase in fees during the year reflects the first year audit fees for the WCX M5 Entities.

42 Directors Report and Financial Statements 42 Directors Declaration 1. In the opinion of the Directors the financial statements and notes set out on pages 12 to 41. i. give a true and fair view of the financial position of the Company and its controlled entities as at 30 June and of its performance for the financial year ended on that date; and ii. comply with Australian Accounting Standards, the Corporations Act 2001, the provisions of the Public Finance and Audit Act 1983 and Public Finance and Audit Regulations, International Financial Reporting Standards as disclosed in Note 1, other mandatory professional reporting requirements and the Treasurer s Directions. 2. There are reasonable grounds to believe that the Company and its controlled entities will be able to pay its debts as and when they become due and payable. This declaration has been made pursuant to S295(5) of the Corporations Act 2001 in accordance with a resolution of the Board of Directors dated 22 September. Signed on behalf of the Board: Peter Brecht Chairman Dennis Cliche Director Sydney, 22 September Sydney, 22 September